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Diplomacy in Action

Azerbaijan (08/02)


For the most current version of this Note, see Background Notes A-Z.


Republic of Azerbaijan

Location: South Caucasus; bordered by Russia to the north, the Caspian Sea to the east, Iran to the south, and Georgia and Armenia to the west.
Area: 33,774 square miles (includes Nakhchivan and Nagorno-Karabakh); slightly smaller than Maine.
Cities: Capital--Baku.
Terrain: Caucasus Mountains to the north, lowland in the central area through which the Kura River flows.
Climate: Dry, subtropical with hot summers and mild winters; forests, meadows and alpine tundra in the mountains.

People (2000)
Nationality: Noun--Azerbaijani(s), Azeri. Adjective--Azerbaijani, Azeri.
Population: 8,082,000 (December 2000 est.).
Population growth rate: .27%.
Net migration rate: -5.92/1,000.
Ethnic groups: Azeri 90%, Dagestani Peoples 3.2%, Russian 2.5%, Armenians 2%, and other 2.3% (1998 est.).
Religion: Muslim 93.4% (majority Shia), Russian Orthodox 2.5%, Armenian Orthodox Church 2.3%, and other 1.8%.
Languages: Azerbaijani 89%, Russian 3%, Armenian 2%, and other 6%. Education: Literacy--97%.
Health: Infant mortality rate--83.41/1,000 live births (2000 est.). Life expectancy--63 years.
Work force (3 million): Agriculture and forestry--42.3%; industry--6.9%; construction--4.2%; other--46.6%.

Type: Republic.
Constitution: Approved in November 1995 referendum.
Independence: August 30, 1991 (from Soviet Union).
Branches: Executive--President (chief of state), Prime Minister (head of government), Council of Ministers (cabinet). Legislative--unicameral National Assembly (parliament). Judicial--Supreme Court.
Administrative subdivisions: 78 rayons, 11 cities, and 1 autonomous republic.
Political parties: New Azerbaijan Party, Popular Front Party, Musavat Party, National Independence Party, Civic Solidarity Party, Social Democratic Party, Communist Party, Liberal Party, Azerbaijan Democratic Independence Party, Islamic Party, plus 50 minor parties.
Suffrage: 18 years of age; universal.

Economy (2000)
GDP: $4.8 billion (GOAJ-reported).
GDP real growth rate: 11.4%.
Per capita GDP: $600 (GOAJ-reported).
Inflation rate: 1.8%.
Unemployment rate: 20%. (GOAJ-reported).
Natural resources: Petroleum, natural gas, iron ore, nonferrous metals, and alumina.
Agriculture: Products--Cotton, tobacco, grain, rice, grapes, fruit, vegetables, tea, cattle, pigs, sheep, and goats.
Industry: Types--Petroleum and natural gas, petroleum products, oil field equipment; steel, iron ore, cement; chemicals and petrochemicals.
Trade: Exports--$1.7449 billion: oil and gas, chemicals, oil field equipment, textiles, cotton. Imports--$1.1721 billion: machinery and parts, consumer durables, foodstuffs, textiles. Major trade partners--Italy, Russia, Turkey, Israel, U.S., Iran, other EU, and other NIS countries.

Azerbaijan combines the heritage of two venerable civilizations--the Seljuk Turks of the 11th century and the ancient Persians. Its name is thought to be derived from the Persian phrase "Land of Fire," referring both to its petroleum deposits, known since ancient times, and to its status as a former center of the Zoroastrian faith. The Azerbaijani Republic borders the Iranian provinces of east and west Azerbaijan, although they have not been united into a single state in modern times.

Little is known about Azerbaijan's history until its conquest and conversion to Islam by the Arabs in 642 AD. Centuries of prosperity as a province of the Muslim caliphate followed. After the decline of the Arab Empire, Azerbaijan was ravaged during the Mongol invasions but regained prosperity in the 13th-15th centuries under the Mongol II-Khans, the native Shirvan Shahs, and under Persia's Safavid Dynasty.

Due to its location astride the trade routes connecting Europe to central Asia and the Near East and on the shore of the Caspian Sea, Azerbaijan was fought over by Russia, Persia, and the Ottomans for several centuries. Finally the Russians split Azerbaijan's territory with Persia in 1828 by the Treaty of Turkmenchay, establishing the present frontiers and extinguishing the last native dynasties of local Azerbaijani khans. The beginning of modern exploitation of the oil fields in the 1870s led to a period of unprecedented prosperity and growth in the years before World War I.

At the collapse of the Russian Empire in 1917, an independent republic was proclaimed in 1918 following an abortive attempt to establish a Transcaucasian Republic with Armenia and Georgia. Azerbaijan received de facto recognition by the Allies as an independent nation in January 1920, an independence terminated by the arrival of the Red Army in April. Incorporated into the Transcaucasian Federated Soviet Socialist Republic in 1922, Azerbaijan became a union republic of the U.S.S.R. in 1936. The late 1980s were characterized by increasing unrest, eventually leading to a violent confrontation when Soviet troops killed 190 nationalist demonstrators in Baku in January 1990. Azerbaijan declared its independence from the U.S.S.R. on August 30, 1991.

The Government of Azerbaijan consists of three branches: the executive branch is made up of the President, his Apparat, a Prime Minister, and the Cabinet of Ministers; the legislative branch consists of the 125-member Parliament (Milli Majlis). Members are elected for 5-year terms, with 100 of them elected from territorial districts and 25 elected from party lists; and the judicial branch, headed by a Constitutional Court, is nominally independent.

Azerbaijan declared its independence from the former Soviet Union on August 30, 1991, with Ayaz Mutalibov, former First Secretary of the Azerbaijani Communist Party, becoming the country's first President. Following a massacre of Azerbaijanis at Khojali in Nagorno-Karabakh in March 1992, Mutalibov resigned and the country experienced a period of political instability. The old guard returned Mutalibov to power in May 1992, but less than a week later his efforts to suspend scheduled presidential elections and ban all political activity prompted the opposition Popular Front Party (PFP) to organize a resistance movement and take power. Among its reforms, the PFP dissolved the predominantly Communist Supreme Soviet and transferred its functions to the 50-member upper house of the legislature, the National Council.

Elections in June 1992 resulted in the selection of PFP leader Abulfez Elchibey as the country's second president. The PFP-dominated government, however, proved incapable of either credibly prosecuting the Nagorno-Karabakh conflict or managing the economy, and many PFP officials came to be perceived as corrupt and incompetent. Growing discontent culminated in June 1993 in an armed insurrection in Ganja, Azerbaijan's second-largest city. As the rebels advanced virtually unopposed on Baku, President Elchibey fled to his native province of Nakhchivan. The National Council conferred presidential powers upon its new Speaker, Heydar Aliyev, former First Secretary of the Azerbaijani Communist Party (1969-81) and later a member of the U.S.S.R. Politburo and U.S.S.R. Deputy Prime Minister (until 1987). Elchibey was formally deposed by a national referendum in August 1993, and Aliyev was elected to a 5-year term as President in October with only token opposition. Aliyev won re-election to another 5-year term in 1998, in an election marred by serious irregularities.

Azerbaijan's first Parliament was elected in 1995. The present 125-member unicameral Parliament was elected in November 2000 in an election that showed improvements in democratic processes but still did not meet international standards as free and fair. A majority of parliamentarians are from the President's "New Azerbaijan Party." Opposition parties are represented in Parliament. According to the Constitution, the Speaker of Parliament stands next in line to the President. The current Speaker is Murtuz Aleskerov. Azerbaijan has a strong presidential system in which the legislative and judicial branches have only limited independence.

Principal Government Officials
President--Heydar Aliyev
Prime Minister--Artur Rasizade
Foreign Minister--Vilayat Guliyev
Ambassador to the United States--Hafiz Pashayev
Ambassador to the United Nations--Yashar Aliyev

Azerbaijan's embassy in the U.S. is at 2741 - 34th Street NW, Washington, DC 20008, tel: (202) 337-3500; fax (202) 337-5911; Consular tel: (202) 337-5912; Consular fax (202) 337-5913

Azerbaijan is an economy in transition in which the state continues to play a dominant role. It has important oil reserves and a significant agronomic potential based on a wide variety of climatic zones. Since 1995, in cooperation with the International Monetary Fund, Azerbaijan has pursued a highly successful economic stabilization program, which has brought inflation down from 1,800% in 1994 to 1.5% in 2001. GDP in 2001 grew by more than 9.9% the sixth consecutive increase. The national currency, the manat, was stable in 2001, depreciating 3.9% against the dollar. The budget deficit equaled a modest 0.5% of GDP in 2001.

Progress on economic reform has generally lagged behind macroeconomic stabilization. The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy, but inefficient public administration in which commercial and regulatory interests are comingled limit the impact of these reforms. The government has largely completed privatization of agricultural lands and small and medium-sized enterprises.

For more than a century the backbone of the Azerbaijani economy has been petroleum. Now that Western oil companies are able to tap deepwater oilfields untouched by the Soviets because of poor technology, Azerbaijan is considered one of the most important spots in the world for oil exploration and development. Proven oil reserves in the Caspian Basin, which Azerbaijan shares with Russia, Kazakhstan, and Turkmenistan, are comparable in size to the North Sea, although exploration is still in the early stages.

Azerbaijan has concluded 21 production-sharing agreements with various oil companies. Eastern Caspian producers in Kazakhstan also have expressed interest in accessing this pipeline to transport a portion of their production. Partner sanctions of the Baku-Tbilisi-Ceyhan oil export pipeline was completed in August 2002 and construction awards here announced. Actual construction will begin in the second quarter of 2003, with completion projected by the end of 2004. A Baku-Tbilisi-Erzurum gas export pipeline should be sanctioned in the fourth quarter of 2002.

Environmental Issues
Azerbaijan faces serious environmental challenges. Soil throughout the region was contaminated by DDT and toxic defoliants used in cotton production during the Soviet era. Caspian petroleum and petrochemicals industries also have contributed to present air- and water-pollution problems. Several environmental organizations exist in Azerbaijan, yet few funds have been allocated to begin the necessary cleanup and prevention programs. Over-fishing by poachers is threatening the survival of Caspian sturgeon stocks, the source of most of the world's supply of caviar. The Convention on International Trade in Endangered Species has listed as threatened all sturgeon species, including all commercial Caspian varieties.

In July 1992, Azerbaijan ratified the Treaty on Conventional Armed Forces in Europe (CFE), which establishes comprehensive limits on key categories of conventional military equipment and provides for the destruction of weaponry in excess of those limits. Although Azerbaijan did not provide all data required by the treaty on its conventional forces at that time, it has accepted on-site inspections of forces on its territory. Azerbaijan approved the CFE flank agreement in May 1997. It also has acceded to the nuclear Non-Proliferation Treaty as a non-nuclear weapons state. Azerbaijan participates in NATO's Partnership for Peace.

The U.S. embassy in Baku, Azerbaijan is at 83 Azadliq Prospect; tel: 9-9412-98-03-35; fax: 9-9412-98-37-55;

Azerbaijan is a member of the United Nations, the Organization for Security and Cooperation in Europe, NATO's Partnership for Peace, Euro-Atlantic Partnership, World Health Organization, CFE Treaty member state, the European Bank for Reconstruction and Development, the Council of Europe, the Community of Democracies, the International Monetary Fund, and the World Bank.

The major domestic issue affecting Azerbaijan is the dispute over Nagorno-Karabakh, a predominantly ethnic Armenian region within Azerbaijan. The current conflict over Nagorno-Karabakh (NK) began in 1988 when Armenian demonstrations against Azerbaijani rule broke out in both NK and Armenia and the NK Supreme Soviet voted to secede from Azerbaijan. In 1990, after violent episodes in NK, Baku and Sumgait, Moscow declared a state of emergency in NK, sent troops to the region, and forcibly occupied Baku. In April 1991, Azerbaijani militia and Soviet forces targeted Armenian paramilitaries operating in NK; Moscow also deployed troops to Yerevan. However, in September 1991, Moscow declared it would no longer support Azerbaijani military action in NK. Armenian militants then stepped up the violence. In October 1991, a referendum in NK approved independence.

More than 30,000 people were killed in the fighting from 1992 to 1994. In May 1992, Armenian and Karabakhi forces seized Susha (the historical, Azerbaijani-populated capital of NK) and Lachin (thereby linking NK to Armenia). By October 1993, Armenian and Karabakhi forces had succeeded in occupying almost all of NK, Lachin and large areas in southwestern Azerbaijan. As Armenian and Karabakhi forces advanced, hundreds of thousands of Azerbaijani refugees fled to other parts of Azerbaijan. In 1993, the UN Security Council adopted resolutions calling for the cessation of hostilities, unimpeded access for international humanitarian relief efforts, and the eventual deployment of a peacekeeping force in the region. The UN also called for immediate withdrawal of all ethnic Armenian forces from the occupied territories of Azerbaijan. Fighting continued, however, until May 1994 when Russia brokered a cease-fire.

Negotiations to resolve the conflict peacefully have been ongoing since 1992 under the aegis of the Minsk Group of the OSCE. The Minsk Group is currently co-chaired by Russia, France, and the United States and has representation from Turkey, the U.S., several European nations, Armenia, and Azerbaijan. Despite the 1994 cease-fire, sporadic violations, sniper fire, and landmine incidents continue to claim more than 100 lives each year.

Since 1997, the Minsk Group Co-Chairs have presented three proposals to serve as a framework for resolving the conflict. One side or the other rejected each of those proposals. Beginning in 1999, the Presidents of Azerbaijan and Armenia initiated a direct dialogue through a series of face-to-face meetings, often facilitated by the Minsk Group Co-Chairs. Most recently the OSCE sponsored a round of negotiations between the Presidents in Key West, Florida. U.S. Secretary of State Colin Powell launched the talks on April 3, 2001, and the negotiations continued with mediation by the U.S., Russia, and France until April 6, 2001. The Co-Chairs are continuing to work with the two Presidents in the hope of finding a lasting peace.

The dissolution of the Soviet Union in December 1991 brought an end to the Cold War and created the opportunity to build relations with its successor states as they began a political and economic transformation. The United States opened an embassy in Azerbaijan's capital, Baku, in March 1992.

The United States has been actively engaged in international efforts to find a peaceful solution to the Nagorno-Karabakh conflict. The U.S. has played a leading role in the Minsk Group, which was created in 1992 by the Conference on Security and Cooperation in Europe--now the Organization for Security and Cooperation in Europe (OSCE)--to encourage a peaceful, negotiated resolution to the conflict between Azerbaijan and Armenia. In early 1997, the U.S. heightened its role by becoming a co-chair, along with Russia and France, of the Minsk Group.

The U.S. supports American investment in Azerbaijan. U.S. companies are involved in three offshore oil development projects with Azerbaijan, and U.S. companies in other fields such as telecommunications have been exploring the emerging investment opportunities in Azerbaijan.

The United States is committed to aiding Azerbaijan in its transition to democracy and formation of an open market economy. The Freedom Support Act (FSA), enacted in October 1992, has been the cornerstone of U.S. efforts to help Azerbaijan during this transition. Under the FSA, the U.S. to date has provided approximately $165.92 million in humanitarian and developmental assistance to Azerbaijan, including $32.18 million in FY 2000.

The U.S. and Azerbaijan have signed a bilateral trade agreement, and Azerbaijan has most-favored- nation status. A Bilateral Investment Treaty also has been signed.

U.S. Humanitarian Assistance
Since 1992, the United States has disbursed more than $140 million in humanitarian assistance to the IDP, refugee, and war-affected populations of Azerbaijan. U.S. assistance is provided principally through Private Voluntary Organizations (PVOs). The primary PVOs now implementing and coordinating USAID funded assistance programs are Mercy Corps International, Adventist Development and Relief Agency, International Rescue Committee, Save the Children, and the Community Housing Foundation. Likewise, Shore Bank LTD and the Foundation for International Community Assistance provide small- and medium-scale loans to the IDP, refugee, and war-affected populations to increase their economic viability. U.S. Agency for International Development, U.S. Department of Agriculture, as well as the State Department's Bureau of Population, Refugees and Migration and the Office of the Coordinator for U.S. Assistance to the New Independent States provide funds directed toward increased humanitarian assistance.

Principal U.S. Embassy Officials
Ambassador--Ross Wilson
Deputy Chief of Mission--Nancy McEldowney
POLECON Chief--Caryn McClelland
Consular Officer--Greg Segas
Administrative Officer--TBD
Public Affairs Officer--Theresa Morkin
USAID Country Coordinator--William McKinney
Defense Attache--Maj. Marc Jasper USMC
Commercial Officer--Michael Lally

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